A Global Recession? The Warning Signs Are Everywhere

Is it possible that we are already in a global recession but just don't know it yet?

And is the U.S. itself-still the epicenter of the world economy-standing on the front edge of another recession?

I sincerely hope I'm wrong. But warning signs are everywhere.

The eurozone economy is flat on its back. Greece may be headed for a political crackup and an exit from the euro and European Union. Deposit runs in Greece and elsewhere are beginning, and a credit freeze throughout the continent is not out of the question. Meanwhile, emerging economies like China, India, and Brazil are slumping.

Here at home, ex-Clinton strategists James Carville and Stan Greenberg sent a memo to President Obama telling him that his campaign message of slow and steady recovery progress is out of touch with Main Street America. They're right. Of course, Obama's "private sector is doing just fine" statement is part and parcel of his disconnect from economic reality.

And the reality isn't good. Whether you're a Democrat or Republican, take a look at the numbers:

Job growth has been slipping badly for three months. Retail sales and factory orders are down two straight months. Real incomes are flat. Household wealth is way underwater from the housing collapse, dropping nearly 40 percent in the last three measured years. And GDP was an anemic 1.9 percent in the first quarter. Nearly all leading Wall Street economists are marking down their second-quarter estimates to 2 percent or less.

But here's the key point: 2 percent growth is not a recovery. Many economists would call it a growth recession. When you get that low there's little margin for error. A shock from Europe, an inventory selloff in the U.S., or almost any unexpected event could push us back into negative territory for an official double-dip recession.

The last saving grace for the U.S.? Business sales and profits are still trending higher, although GDP-measured profits did fall in the first quarter. That needs to be watched carefully.

That said, a recent IBD poll shows that the number of households with at least one person looking for employment is 23 percent. That translates to 30 million people looking for work. That's not a recovery.

I can think of two major reasons for the latest economic stall-even inside an overall recovery rate that's only half the normal pace of post-WW II recoveries. First is the deflationary impact of a sharp, nearly 10 percent rise in the exchange value of the dollar relative to the euro.

That's imparting a deflationary influence on the economy, where both import and producer prices have recently turned negative. The good side of commodity deflation is that oil and retail gas prices have fallen considerably; the bad side is that manufacturers may hold back production and that debtors have to climb out of deeper holes.

As someone who always touts the merits of a strong King Dollar, why am I complaining now that we have one? That's my second reason for the latest economic stall: King Dollar is not being accompanied by lower tax rates.

The original supply-side growth model argued for a strong dollar and lower taxes, where the former keeps prices stable and the latter provides fresh growth incentives. But instead of easier taxes, a huge tax-hike cliff looms. Big problem. Wrong model. Anti-growth.

As the Bush era tax cuts expire at year end, so do the temporary payroll tax cut and the alternative minimum tax patch. By some estimates, over $400 billion in cash will be pulled out of the economy in 2013, along with a rollback of growth-oriented, marginal-tax-rate incentives.

It's hard to quantify, but it's quite possible that business hiring plans and consumer-spending expectations have been put on hold until folks can figure out future tax policy.

All this is why the tax-cliff problem needs to be solved immediately. If the tax cuts are extended sooner rather than later, the economy might straighten out faster than most folks think.

But House Speaker John Boehner told me that while he's ready to talk to President Obama, the phone isn't ringing. And while House Republicans are expected to pass a tax-cut extension in July, it won't go anywhere without White House support.

Unfortunately, the president is still talking about tax hikes on the rich. He should listen to Bill Clinton who argues for a full tax-cut extension to stop recession. If we wait until after the election to address the tax cliff, we will face uncertainty and chaos, bringing us closer to recession.

When all of these tax breaks for the workers slip off the table, it may not be really worth it to get up and go in everyday? America still has enough round the belly shield still to not feel yet what the rest of the world is already? But, we have all of the over spent and, the many baby factory people who are in dept and unemployed. When they freeze the banks here like they did in Italy we will just sit back and take it like they are doing now. Everyone sees it coming. But, we all are going to have to take our own bite of it when it does come to pass.

Buy ammo. Buy Components to make ammo. Stack the food high and deep. Cache it off site, and tell nobody.

Trouble is not far off, and we will be damned lucky if we fend it off again. At least our boys and girls are out of the sandbox. Time to bring home the rest of them, make a short list of our friends in this world, and only help them.

China and the rest would DIE a horrible death without our patronage. We need to remember who is feeding who. They need US as in the U.S. far more than we need them. We are the only nation in the world that really could be totally self sufficient in terms of food, energy, economy, etc.

Recession hell we are in a depression = Yes again, the only reason it doesn't look like the depression, no soup lines & homeless, today it's food stamps & welfare

MUSIBIKE, hoping the best for you and your company.
I worry about this happening a good bit, work at a magazine/book circulation company, more people going to electronics or down loadable reading material all the time, and when the budgets starts to get tight people are not going to waste money on reading material.

"Government is not the solution to our problem, government is the problem" Ronald Reagan

Don't know bellson,,, I'd have an awfull hard time living with out my Chinese widgets!! I got an idea lets send all that "pink slime" meats and Mc D's over and they'll all be on Hovera rounds within the next 5 years, won't be no problem then!!! Unless they mount rpg's on the handle bars!!!

Recession hell we are in a depression = Yes again, the only reason it doesn't look like the depression, no soup lines & homeless, today it's food stamps & welfare

MUSIBIKE, hoping the best for you and your company.
I worry about this happening a good bit, work at a magazine/book circulation company, more people going to electronics or down loadable reading material all the time, and when the budgets starts to get tight people are not going to waste money on reading material.

that and unlimited borrowing from china and currency printing. this in the end is going to be worse because were going to have more hyper inflation combined with massive lay-offs.

the bad thing is we need to save more $$$ but you can't because inflation caused by gov borrowing/printing is eating up your savings like one of those "flesh eating zombies"--
and it is going to be tough to sell assets cause everybody is cash strapped--

Stack the chow deeper than the ammo!!!! Ya only have to bite a bullet once,, chow you'll need to bite more . Lots and Lots of both though.

And did I miss something here????? I thought we WERE in a depression already!!!! My bank account sure looks DEPRESSED to me!!!!! Attitude ain't much better eaither!!!!!!
There's still plenty of soup kitchens and homeless around, just like ya say though more welfare avalible so not so eveident, but there,,,, there, to many for a country that used to have so many opertunities for "the people" IMO.